This document discusses environmental factors that influence entrepreneurship development in Nigeria. It examines some of Nigeria's policy programs aimed at entrepreneurship development and finds that most are moribund or ineffective. Specifically, it finds that many programs have been discontinued by successive governments or lack adequate resources for operation. Where programs are still in place, their impact is not felt across all societal levels due to a skewed implementation. The document recommends auditing programs to avoid duplication, ensuring continuity of implementation, expanding credit institutions' activities beyond current areas, and sustained entrepreneurship education programs.
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We are living in a time of unprecedented public interest in the relationship between government and the economy. Americans are attentive--deeply concerned about the impact of the economic downturn and its implications for the future. But they are also wary. While they want government action, they are harshly critical of high profile steps such as bailouts, and nervous about spending and the deficit. Making real progress on a whole host of important economic policies, from reshaping Wall Street regulations to investing in the jobs and economy of the future, will require a more active role for government than the U.S. has seen in decades. Building and sustaining public will to support this engagement by the public sector is an underlying and foundational challenge.
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Environmental factors and entrepreneurship development1
1. 166
ENVIRONMENTAL FACTORS AND ENTREPRENEURSHIP DEVELOPMENT IN NIGERIA
Oluremi Hezekiah Abimbola and Gbenga Mayowa Agboola
Covenant University, Nigeria
ABSTRACT
The interface between entrepreneurship and the entrepreneurial environment has been given attention in entrepreneurship
literature. This paper starts by placing the issue of entrepreneurial environment in theoretical context, with particular
reference to Nigeria. Two major theoretical perspectives were considered; however, the work dwelt extensively on the
demand side perspective, which gives primacy to the compelling influence of environment on entrepreneurial practice. Using
resources from academic publications, reports and publications of government agencies and other stakeholders in the field of
entrepreneurship in Nigeria, some policy programmes of government were examined with a view to understanding their
relevance and states in entrepreneurship development initiatives in the country. It was found that most of the programmes
considered were moribund either due to discontinuation by succeeding governments or lack of adequate resources, both
human and material, for their operations. In few cases where the programmes were in place, a skewed spread was observed,
which was capable of hampering the success of these programmes. The paper recommends the following: an auditing of all
the policy programmes to avoid duplication and clashes in spheres of operation; continuity in programme implementation;
commitment from credit institutions to spread their activities beyond the “comfort zones” in which they currently operate;
and sustained education and enlightenment programmes on the opportunities that abound in the environment amongst others.
Key words: Environment, Entrepreneurship, Development, Nigeria
INTRODUCTION
Entrepreneurial activities have been found to be capable of making positive impacts on the economy of a nation and the
quality of life of the people (Schumpeter, 1934; Weber, 1904; Adejumo, 2001; & Morris & Lewis, 1991). Studies have
established its positive relationship with stimulation of economic growth; employment generation; and empowerment of the
disadvantaged segment of the population, which include women and the poor (Thomas and Mueller, 2000; Reynolds, 1987;
Shapero, 1981).
Several studies have linked increased entrepreneurial activities to national socio-economic development (Weber, 1904;
McClelland, 1961). For example, Weber (1904) averred that the great development noticed in the Western World in the 19th
century was attributable to the entrepreneurial orientation that was present in the society. In a similar vein, McClelland
(1961) contended that the presence of quite a number of people with high need for achievement (n-ach) precipitated the
Journal of Sustainable Development in Africa (Volume 13, No.4, 2011)
ISSN: 1520-5509
Clarion University of Pennsylvania, Clarion, Pennsylvania
2. 167
development in the capitalist societies relative to other contexts. Other studies that have trodden a similar pattern of argument
include Kets de Vries (1977), Brockhaus and Horwitz (1986), and Sexton and Upton (1990).
Another interesting dimension in the study of entrepreneurship is the differential operations of its roles in different levels of
socio-economic development. In other words, entrepreneurial activities have been found to be functioning differently in
different levels of socio-economic development. For example, in industrialized nations, increased entrepreneurial activity
serves to reposition dying industries; provides new jobs to compensate for employment problems created by corporate
restructuring and downsizing; and to generally enhance economic flexibility and growth (Thomas and Mueller, 1999). It is
also a catalyst for technological progress (Reynolds, 1987). Shapero (1981) describes entrepreneurship as key to self-
renewing economies.
In less developed countries, on the other hand, entrepreneurship functions in the following areas: stimulation of economic
growth (Harper, 1991); replacement of crumbling state-owned enterprises, some of which are legacies of colonial rule; a
means of employment generation; and an avenue for empowering the disadvantaged segment of the population.
Entrepreneurship researches have established relationships between the business environment and entrepreneurial activities
(Dobbin and Dowd, 1997; Borkowski and Kulzick, 2006; Carter and Wilton, 2006). The effective manifestation of the
functions and roles of entrepreneurship in socio-economic development have often been attributed to the presence of certain
factors in the external environment of the entrepreneur over which he has little or no control. Borkowski and Kulzick
(2006) list the interplay between entrepreneurship and environment as follow:
a. new venture strategies are formed in response to environmental forces;
b. entrepreneurs are negative towards and will resist political interference; and
c. unstable environments are negatively related to growth opportunities.
The business environment is inclusive of the physical infrastructure such as transportation, water and electricity as well as
non-physical resources like regulatory policies, education, procedures and financial credit. This work attempts to examine
the interface between the entrepreneurial environment and entrepreneurial practice in Nigeria.
In this write up, we adopt Thornton’s (1999:20) definition of entrepreneurship, which considers it as “creation of new
organization..., which occurs as a context-dependent, social and economic process”. This definition is a combination of the
emphasis of Gartner, (1988); Reynolds, (1991); and Low and Abrahamson, (1997).
THE INTERFACE BETWEEN ENTREPRENEURSHIP AND ENVIRONMENT: THEORETICAL PERSPECTIVES
There has been an array of perspectives put up to examine the connections between entrepreneurial activities and the
environment. Prominent among these is the work of Thornton (1999); she attributes entrepreneurial activities in a society to
the following explanations; supply-side and demand-side perspectives. The supply-side perspective emphasizes the role of
individuals in creating entrepreneurial environment. This perspective, according to Thornton (1999), holds that “special types
of individuals create entrepreneurship”. This is further linked to economic development or undevelopment. This perspective
3. 168
attributes economic development of any society to an adequate supply of ‘special’ individuals with traits that are compatible
with entrepreneurial practices.
There are, however, two approaches to the supply-side perspective. These include the psychological supply-side and the
sociological supply-side. The former emphasizes the presence of individuals with entrepreneurship-compatible traits while
the latter focuses on the presence of groups and cultures that are facilitating of entrepreneurial activities. Each of the two
approaches conforms to the focus of the respective academic discipline from which it derives. While psychology sees the
individual as the unit of analysis; sociology takes a macro view of society. It is not surprising, therefore, that while
psychological supply side focuses on ‘special’ individuals as precursors of entrepreneurship; sociological supply side
emphasizes the role of culture and groups.
It can be arguably said that Thornton got inspiration from the works of Weber (1904) and McClleland (1961). The two
scholars had argued in favour of the primacy of entities in engendering entrepreneurship in society. For example, McClleland
(1961) believes that the need for achievement by an individual is a precursor of entrepreneurial activities and a strong
motivation for engaging in entrepreneurship. Borkowski and Kulzick (2006:481), while corroborating the assumption of
McClleland, contend that:
an individual with a high n-Ach takes personal responsibility for finding solutions to problems but avoids
situations where the outcome depends not on his abilities and efforts but on chance or other factors
beyond his control; and tends to set moderate achievement goals and to take “calculated risks” because
the individual is not a gambler.
The more macro view, which is more recent in entrepreneurship research, holds that entrepreneurial success is not only a
condition of traits and behaviours of individuals but also the environment in which entrepreneurship takes place (Lee and
Peterson, 2000). Similarly, Wilken (1979) corroborates the imperatives of a conducive socio-economic environment to the
growth of entrepreneurial activities. His analysis attributes a major causal influence to government actions on conditions that
are conducive to entrepreneurship development.
Environment, in this sense, is encompassing of such factors as infrastructure, cultural, economic, social and political
environments. These environmental forces have been found to be capable of either impeding or facilitating entrepreneurial
activities in any society. Gnyawali and Fogel (1994) define the entrepreneurial environment as “the overall economic, socio-
cultural and political factors that influence people’s willingness and ability to undertake entrepreneurial activities”. As
Romanelli (1989) notes, availability of resources brings about the emergence of entrepreneurs.
The above view is summed in what is known in entrepreneurship literature as demand side perspective. Glade (1967: 251), as
cited in Thornton (1999) defines the demand side perspective, which actually came from the works of Marxists, economists
and geographers, as an “opportunity structure, an ‘objective’ structure of economic opportunity and a structure of differential
advantage in the capacity of the system’s participants to perceive and act upon such opportunities”.
4. 169
Deriving from the demand perspective is the ecological model, which originally derives from the works of zoologists and
botanists. This model explains the rate of entrepreneurship in terms of the availability and distribution of environmental
resources. There is little the personal traits of the individual could do in the face of daunting environmental constraints
(Agboli & Ukaegbu, 2006).
ENTREPRENEURSHIP ENVIRONMENT IN NIGERIA
Entrepreneurship researchers have identified various environmental factors, which some have tagged external factors.
Principal among the factors identified are influences of firms, influences of markets (Thorntorn, 1999); public policies
(Dobbin and Dowd, (1997); regulations and policies (Baumol, 1990) and physical infrastructure (Agboli & Ukaegbu,
2006). Some scholars have gone ahead to particularize or associate environmental needs to the level of economic
development. For example, Agboli & Ukaegbu (2006) emphasize the imperatives of physical infrastructure of other
external factors in their study of Nigerian entrepreneurs.
Table 1: Perceptions of Nigerian Entrepreneurs to Infrastructure Services
S/N Infrastucture Major Problem %
1 Electricity 92
2 Water 85
3 Tarred Roads 79
4 Waste Disposal 73
5 Telecommunication 69
6 Security (Police) 66
7 Trucking Services 51
8 Postal Service 27
9 Air Freight Service 12
Source: Agboli and Ukaegbu, 2006
The World Bank (2005), as part of its findings in a study on Doing Business across the globe states that:
• Businesses in poor countries face much larger regulatory burdens than those in rich countries. They face 3 times the
administrative costs, and nearly twice as many bureaucratic procedures and delays associated with them. And they
have fewer than half the protections of property rights of rich countries.
• Heavy regulation and weak property rights exclude the poor from doing business. In poor countries 40% of the
economy is informal. Women, young and low-skilled workers are hurt.
The World Bank’s Doing Business 2008 report quotes Nigeria as ranking 108 among 178 economies compared. The report
finds many Sub-Saharan countries like Mauritius, Botswana, Ethiopia, Ghana, Kenya, and South Africa more business
friendly than Nigeria.
5. 170
Where other economies as in developed world may be talking of industry-specific needs, Nigeria is still grappling with needs
that are basic to entrepreneurial activity irrespective of the sector of the economy. For example, Idehen (2007, April 26), an
industrialist contends that:
Without doubt, the greatest challenge that our business and others in Nigeria are facing is inadequate
infrastructure. Of course, a lot of people have explained how lack of infrastructure greatly affects businesses. But
the truth remains that the relevant agencies of government have no idea how monstrous the problem is. In our
transport division, we spend a lot of money whenever our vehicles travel to other parts of the country, because of
the very bad state of the roads. Power supply is the worst. The money we spend on acquisition and maintenance of
generators can start a business of its own and employ a lot of people.
In the same light, the World Bank Discussion of 2008 Doing Business Report credits Abugu, the National President of the
Nigerian Association of Small and Medium Enterprises (NASME), as saying that the yardstick adopted by the World Bank
in ranking economies on business environment friendliness is faulty. He argues that the most pressing needs of the Nigerian
entrepreneurial environment such as physical infrastructure, credit facilities and favourable tax policy were left out in the
parameters for measuring environmental friendliness of economies. Eboh (2007, September 25) quoted Ghanem, the
country representative of the World Bank as saying that “the tax burden on Nigerian business is internationally competitive,
but the mode of collection is one of the worst in the world. Multiple taxes levied by the three tiers of government have also
resulted in a proliferation of taxes, some of which are illegal”.
Some entrepreneurship policy initiatives in Nigeria
The reality of the importance of entrepreneurship to society’s socio-economic development has led various levels of
government in Nigeria to institute measures that aim at enhancing entrepreneurial activities. Such measures/programmes are
categorized into two:
1. entrepreneurship development programmes and institutions; and
2. finance and micro-credit programmes and institutions.
The first category comprises policies and programmes aimed at stimulating, developing and enhancing the capacities of
entrepreneurs, while the second category consists of measures aimed at providing stress-free credit facilities for entrepreneurs
as shown in table 1.
6. 171
Table 2: Selected policy programmes aimed at entrepreneurship development in Nigeria
Programme Objective Remarks
1 Industrial
Development Centres
(IDCs)
Provision of extension services to SMEs in project
appraisal and training
Lack of adequate
equipment and funding
2. Small Scale Industries
Credit Scheme
(SSICS)
SSICS was set up to provide technical and financial
support for the SMEs
Inadequate manpower
to monitor advances
leading to repayment
default
3. The Nigerian
Industrial
Development Bank
(NIDB)
NIDB was designed to provide medium to long term
loans for financing of industrial activities
Financial and
administrative
constraints and
currently embroiled in
merger controversy.
4. The Nigerian Bank
for Commerce and
Industry
The bank was set up to provide financial services to
indigenous business community and to administer the
SME 1 World Bank Loan Scheme.
The bank suffered
operational problems,
which resulted into a
state of insolvency
(Sanusi, 2003).
5. National Directorates
of Employment
(NDE)
Responsible for vocational skills development and
small scale enterprises programmes designed to
combat unemployment
Lack of commitment by
the different tiers of
government to its
operations.
6. National Economic
Reconstruction Fund
(NERFUND)
Fill the gap in any observed inadequacies in the
provision of medium to long term financing to small
and medium scale industrial enterprises
Currently embroiled in
merger controversy.
7. Family Economic
Advancement
Programme (FEAP)
Established to provide micro facilities for
entrepreneurs.
Discontinued due to
change in government
8. People’s Bank Designed to make banking services more accessible
and extend credit to the poor.
Discontinued due to
change in government
9. Community Bank Designed to make banking credit accessible to the
active poor.
Discontinued and
substituted with
Microfinance Banks
10 Better Life
Programmes/Family
Support Programme
(BLP/FSP)
Aimed at sensitizing and providing micro-credit
facilities for women entrepreneurs.
Discontinued due to
change in government
11. Small and Medium
Enterprises
Development Agency
of Nigeria
(SMEDAN)
The Small and Medium Enterprises Development
Agency of Nigeria (SMEDAN) was established to
promote the development of the MSME sector of
the Nigerian Economy
The impact is not felt
at all levels of societal
strata.
12. Small & Medium
Enterprises Equity
Investment Scheme
(SMEEIS)
To provide credit facilities for small and medium
entrepreneurs
Lack of national
spread in
implementation
13 Micro Finance Banks Established to provide finance for the active poor in
the population
Lack of national
spread and high
interest rate.
Sources: Sanusi, 2003, Central Bank of Nigeria, 2008
7. 172
On the whole, the aggregate goals of these policies and programmes include, amongst others, stimulation of economic
development, empowerment of the disadvantaged portion of the population, employment generation and invariably, poverty
reduction. The question is then asked: how have the operations of these programmes fared to meet the objectives for which
they were designed? The answer to this question is not farfetched considering the remarks on the policy programmes in the
table above.
Two major strands emerge from the remarks about the policy programmes on the table: the first strand encapsulates
programmes that are moribund while the second strand comprises programmes that are not effective in the roles designed for
them. The programmes that fall in the first strand have fallen victim of any or a combination of the following: discontinuation
as a result of change in government (Family Economic Advancement Programme (FEAP), People’s Bank and Better Life
Programmes/Family Support Programme (BLP/FSP)); merger of related programmes as in the case of the merger of National
Economic Reconstruction Fund (NERFUND), the Nigerian Industrial Development Bank (NIDB) and the Nigerian Bank for
Commerce and Industry (NBCI) into Bank of Industry (BOI); or outright replacement with new programme. A clear example
of this is found in the recent replacement of community banks with microfinance banks.
The second strand that emerges from the remarks comprises policy programmes that are not performing effectively. For
example, Sanusi (2003), in his appraisal of some government initiatives in the area of entrepreneurship development,
contends that most of the programmes are not well designed or lack adequate resources, both human and material, for them to
meet the desired end.
In situations where resources do not present problem, it has been found that spread and coverage have become the albatross
of some of the programmes. The report of the Central Bank of Nigeria on geographical distribution of investments by banks
under the Small & Medium Enterprises Equity Investment Scheme (SMEEIS) as at 25th April 2008 presents a worrisome
dimension. Lagos State accounts for 55.96% of the total number of projects financed under this scheme within the period
under consideration. In the distant second position is Ogun State with 7.65%. The situation is presented in the table below:
8. 173
Table 3: Geographical distribution of investments by banks under the SMEEIS as at 25th
April 2008
Investments as at 25th
April 2008
S/N State No. of projects Amount in Naira % Number % Amount
1 Abuja FCT 9 926,336,000.00 2.75 3.74
2 Abia 9 728,400,000.00 2.75 2.94
3 Adamawa 0 - 0.00 0.00
4 Akwa Ibom 2 118,075,000.00 0.61 0.48
5 Anambra 6 422,398,122.82 1.83 1.71
6 Bauchi 1 68,400,000.00 0.31 0.28
7 Bayelsa 0 - 0.00 0.00
8 Benue 3 88,420,000.00 0.92 0.36
9 Borno 0 - 0.00 0.00
10 Cross River 7 3,785,441,646.55 2.14 15.30
11 Delta 7 247,731,000.00 2.14 1.00
12 Ebonyi 0 - 0.00 0.00
13 Edo 8 493,144,958.27 2.45 1.99
14 Ekiti 2 57,600,000.00 0.61 0.23
15 Enugu 2 117,994,000.00 0.61 0.48
16 Gombe 0 - 0.00 0.00
17 Imo 2 214,938,994.39 0.61 0.87
18 Jigawa 0 - 0.00 0.00
19 Kaduna 7 436,000,000.00 2.14 1.76
20 Kano 8 343,898,346.00 2.45 1.39
21 Katsina 0 - 0.00 0.00
22 Kebbi 0 - 0.00 0.00
23 Kogi 0 - 0.00 0.00
24 Kwara 5 274,004,000.00 1.53 1.11
25 Lagos 183 11,320,462,524.03 55.96 45.74
26 Nasarawa 1 153,000,000.00 0.31 0.62
27 Niger 0 - 0.00 0.00
28 Ogun 25 1,808,264,853.94 7.65 7.31
29 Ondo 6 622,700,000.00 1.83 2.52
30 Osun 1 80,000,000.00 0.31 0.32
31 Oyo 18 443,201,792.00 5.50 1.79
32 Plateau 4 194,661,228.00 1.22 0.79
33 Rivers 9 1,724,943,181.11 2.75 6.97
34 Sokoto 1 27,665,000.00 0.31 0.11
35 Taraba 0 - 0.00 0.00
36 Yobe 0 - 0.00 0.00
37 Zamfara 1 50,000,000.00 0.31 0.20
Total 327 24,747,680,647.11 100.00 100.00
Source: Central Bank of Nigeria, April 2008
Another example is reported by Komolafe (2008, April 30) where it is stated that of the 716 Micro Finance Banks spread
across the country, 282 are located in the South West zone, 169 in the South East zone, 106 in the South South zone, 78 in
the North Central zone, 48 in the North West zone and 33 in the North East. This skewed spread is likely to affect access to
micro financing by the population in the zones where there is low concentration of these banks. The skewed spread is
represented in the table below:
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Table 4: Distribution of Micro Finance Banks in Nigeria
Zone Population % of Total
Population
Number of
MFBS
% of MFBs
1 North-West 35,786,944 25.56 48 6.70
2 North Central 20,266,257 14.47 78 10.89
3 North East 18,971,965 13.55 33 4.60
4 South West 27,581,992 19.70 282 39.39
5 South South 21,014,655 15.01 106 14.80
6 South East 16,381,729 11.70 169 23.60
Total 140,003,542 100 716 100
Sources: Central Bank and National Population Commission of Nigeria, 2008.
One can remark from the above that the policy on Micro Finance Banking has not been placed on a good stead for it to
perform the roles for which it was designed.
Conclusion and recommendation
The evidences reported in this paper and their implications for entrepreneurial activities in the country have pointed to a
negative direction. Researches have established that there exists relationship between entrepreneurial activity and the
environment in which it occurs. From the reviewed literature, it is realized that a blanket approach adopted by International
Agencies such as the World Bank and UNDP amongst others in appraising entrepreneurship environment may not be the best
for Africa and Nigeria in particular; the reason being that the most important environmental factors that are central to
entrepreneurial activity in this context are either ignored or given a secondary place, thereby veiling the major problem that
should be given attention.
The remarks on some of the policy programmes that were considered in this work bring to the fore the need for government
to put in place some measures in a bid to salvage the situation. Some of these measures include first, an auditing of all the
policy programmes aimed at stimulating entrepreneurial activity to avoid duplication and clashes in spheres of operation.
Also, programmes should not be sacrificed on the altar of political expediency, rather, they should be judged by their abilities
to accomplish the objectives for which they were designed. Government should get the credit institutions committed to
spreading their activities beyond the “comfort zones” in which they currently operate. Finally, sustained education and
enlightenment programmes on the opportunities that abound in the environment should be put in place.
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